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February 2020 Commercial Newsletter

February 2020 Commercial Newsletter

Download Complete Newsletter | Volume 8, Issue 2

Here Are Some Tips for Negotiating

So you’re entering into negotiations to buy, sell, or lease a property, and you want to get the best deal that you can, while at the same
time, you want to set the proper tone for negotiations. Because ideally, you’ll want the person on the other side of the negotiations to perceive you as being both interested, and fair.

But with this in mind, when someone submits a ridiculously low offer on a property, or asks for something during negotiations that truly indicates that they’re primarily interested in getting a pound of flesh out of you, this can really serve to kill the negotiations immediately. Because who really wants to deal with someone who seems to be motivated primarily by their own ego, and their total and complete selfishness, unless you really have no other viable options?

One of the first things that you’ll want to keep in mind, is your bottom line for where the deal needs to happen in order for it to still work for you. Because sometimes principals can get so wrapped-up in the emotion of the  negotiations, that they can end up making a deal that they otherwise would have passed on, and there is probably no better example of this than what can happen sometimes during auctions. The two principals continue on in bidding against each other, getting so wrapped-up in wanting to beat the other side, such that when the gavel finally comes down and the judge or auctioneer yells out “sold”, the winning bidder then wonders what the heck they’ve really gotten themselves into!

So pertaining to your own situation, ask how important it is for you to make this deal, and if you end up not making the deal, how good are your alternative options if you’re just willing to walk away from it? Because if this is a deal for a property that you know will be hard to find, and you really, really want it, don’t let your ego get in the way of paying maybe just a little bit more than you wanted to. Because 10-15 years from now you’ll still be thrilled with the property, and you’ll laugh at the idea that maybe you paid just a little too much for it.

However, if there are comparable buildings that you can buy for a better price, or if you’re an owner, and you feel confident that you can sell or lease your property for a better rate to someone else soon, then you can feel justified in just passing on the deal instead.

Either way, when you’re negotiating, understand what your alternatives are, and what the supply and demand within the current market is, and this will then help you to make the decision that’s truly the best one for you.

US Economy Enters New Decade On Smooth Glide Path

CoStar Insight: GDP Holds Steady in Fourth Quarter as Consumers Power Economic Growth

January 30, 2020 By Christine Cooper CoStar Analytics

The U.S. economy ended the year on an even glide path into the new decade according to an advance estimate released by the Department of Commerce, with economic growth powered by a solid consumer sector. The year-end trends support the housing and rental apartment sectors, with still-high levels of consumer sentiment providing a bulwark against potential weakening signs in other sectors of the economy.

The Commerce Department reported gross domestic product grew by an annualized rate of 2.1% in the fourth quarter, duplicating the print of the third quarter and continuing its moderation to an expected slower growth rate in 2020. The annual rate of growth in year 2019 registered 2.3%, matching the average annual rate of growth through this 10-year-long expansion period.

Although real consumer spending slowed to an annualized 1.8% in the fourth quarter after two earlier, more robust quarters, it still accounts for more than half of overall GDP growth. The consumer sector remains in a strong position, with the tight labor market supporting household incomes and with household balance sheets in good shape. Generally good credit quality and high savings rates also feed into the high levels of consumer sentiment.

Business nonresidential investment contracted for the third quarter in a row, as trade restrictions challenge domestic firms in spite of the recent “phase one” trade deal sealed with China. Tariffs levied on $360 billion worth of goods imported from China remain in place, and additional tariffs against other trade partners are repeatedly threatened. Firms still await relief from increased input costs and supply-chain disruptions but face the need to pass costs onto their retailers, squeezing that sector.

Investment in structures, most of which is focused in the weak oil and gas sector, sustained an annualized loss of more than 10%, further deepening the investment pullback seen in the second and third quarters. Investment in equipment, which is read as necessary to boost what has been lackluster productivity, fell for the second consecutive quarter as firms pulled back on capital spending.

The housing sector, however, is showing signs of recovery, as low mortgage rates stimulate demand, lifting builder optimism. Residential investment, having contracted for all of 2018 and half of 2019, grew by 5.8% in the fourth quarter after a 4.6% expansion in the third quarter, ending the year on a positive note.

Trade contributed more than the consumer sector to economic growth in the fourth quarter, accounting for 1.5 percentage points of GDP growth. Imports fell by an annualized 11.6% in the fourth quarter, as domestic purchasers stocked up with supplies earlier in the year to avoid the December increase in tariffs which were ultimately suspended. The resulting decline in inventory growth in the fourth quarter trimmed more than 1 percentage point from headline GDP growth as stocked warehouses were drawn down.

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